Material Requirements Planning (MRP) is a computer-based technique for determining the quantity and timing for the acquisition of dependent demand items needed to satisfy the master schedule requirements.

By identifying precisely what, how many, and when components are needed, MRP systems are able to reduce inventory costs improve scheduling effectiveness, and respond quickly to market changes.

Following are some of the terms frequently used on (computerized) MRP planning forms. Note, however, that not all programs use the same terms or provide the same detail of information.

  1. Gross or Projected requirements: Projected requirements for raw materials, components, subassemblies, or finished goods by the end of the period shown. Gross requirements come from the master schedule (for end items) or from the combined needs of other items.

  2. Scheduled receipts: Materials already on order from a vendor or in-house shop due to be received at the beginning of the period. MRP form shows quantity and projected time of receipt. (Note: Some MRP forms include planned receipts here too.)

  3. Inventory On hand/available: The quantity of an item expected to be available at the end of the time period in which it is shown. This includes amount available from previous period plus planned-order receipts and scheduled receipts less gross requirements.

  4. Net requirements: Net amount needed in the period. This equals the gross requirements less any projected inventory available from the previous period along with any scheduled receipts.

  5. Planned-order receipt: Materials that will be ordered from a vendor or in-house shop to be received at the beginning of the period, otherwise similar to a scheduled receipt.

  6. Planned-order release: The planned amount to be ordered in the time period adjusted by the lead-time offset so that materials will be received on schedule. Once the orders are actually released, the planned-order releases are deleted from the form and the planned-order receipts they generated are changed to scheduled receipts.

In Materials Requirement Planning, if the inventory holding cost is very high and the setup cost is zero, which one of the following lot-sizing approaches should be used?

Correct Answer: B

Materials Requirement Planning is driven by:

Correct Answer: A